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India Equity Research Media June 18, 2021
Mediascope
SECTOR UPDATE
After the break: Blockbuster show
The multiplex industry bore significant and direct brunt of the
pandemic. Fear of the virus compelled state regulations as well as
consumers to turn unfavourable for the industry. Although the second
covid wave has derailed recovery, we expect strong recovery to
commence soon with starting of unlock, pick up in vaccination drives
and opening up of international markets.
In this report: a) we look at global markets to evaluate how fast
footfalls resumed post unlock; and b) how regional films fared during
Unlock 1 in India, to get a better sense of how the industry recovery
will look like in FY22-23.
Eastern markets: Good response despite stringent caps
The Japanese and South Korean markets can be a good comparison to India’s
industry as they have a strong local language film industry co-existing with demand
for Hollywood movies. Both these markets saw many films that pulled in heavy
crowds at theatres despite operating under occupancy caps and strict rules. These
movies did not entail much discounting in ticket prices, which is a strong positive
sign. Apart from local language films, Hollywood blockbusters like F9 have also
garnered strong support. The quick bounce-back of these markets is another strong
positive sign.
Western markets: Strong bounce-back
Western markets are important to look at because most big budget Bollywood films
earn a significant part of revenue from them. US and European markets have
clocked strong recovery after theatres reopened this summer. In Europe, while in
France a bunch of local language films drove up collections post reopening,
Hollywood blockbusters evinced strong response in UK. Multiplexes in these
markets have gradually started relaxing restrictions based on regulatory guidelines
with a few multiplexes permitting vaccinated patrons to not wear masks.
Outlook: India to see huge pent-up demand
India’s multiplex industry has faced strong odds in the past one year with state
restrictions and movie release delays by producers. The next important movie
release window is during the Independence day week in August and Q3FY22.
Already a few states have announced opening up of cinema halls, much quicker
than last time. We expect the industry to see strong pent-up demand given
customers are bored of confined living. Huge content line up also bodes well.
Upcoming movie of Akshay Kumar “Bell Bottom” on 27 July is expected to bring in
huge crowds. Opening up of a number of international markets is also a positive
since Bollywood movies derive significant revenue from overseas markets. Most
consumers and producers still prefer theatre releases and OTT will not cause any
structural change in the industry, in our view. We expect both to co-exist.
Abneesh Roy
+91 (22) 6620 3141
Abneesh.Roy@edelweissfin.com
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Scenario in Eastern global markets
Theatres in Japan
Strong recovery signs in CY20; cinemas close in April 2021: Japan’s cinema
industry showed quick recovery last year when theatres had opened briefly.
There was strong pent-up demand which helped in immediate bounce back. In
fact, the runaway success ‘’Demon Slayer – Kimetsu No Yaiba The Movie:
Mugen Train’’ became the biggest film ever in the market. Cinemas this year,
however, were shut in Tokyo and Osaka beginning April 25 with a state of
emergency extended on May 11.
Cinemas reopen, albeit with restrictions: Movie theatres in Tokyo are now
making preparations to welcome guests once again as the metropolitan
government eases coronavirus restrictions. Officials said the state of emergency
in Tokyo will be extended for three weeks starting June 1, but some restrictions
will be eased.
As per Japan times, the Tokyo Metropolitan Government will allow cinemas to
operate at 50% capacity and until 9 P.M. Osaka Prefecture will likewise be
permitted to open, though only on weekdays until 9 P.M. and also with a
capacity cap. Major Japanese multiplex chain Toho Cinemas said it will reopen
20 sites across Tokyo and Osaka (both represent 35% of Japan’s box office
collections). Another chain United Cinemas confirmed three reopenings in
Tokyo with masks and socially-distanced seating. In the last weekend of May,
movie theaters in 10 prefectures (Tokyo, Osaka, Kyoto, Nagoya, Fukuoka,
Hyogo, Hokkaido, Hiroshima, Okinawa and Okayama) were still shuttered or
operating under restricted capacity and shortened hours.
Outlook: The industry believes it will see quick recovery and almost full
occupancy (within caps) for major movie releases. The fast recovery in footfalls
and strong support for major releases is an extremely positive trend. We
continue to keep an eye on financial impact of operating under restrictions and
pipeline of major movies.
South Korean cinema
The South Korean cinema industry, in pre-pandemic CY19, was the world’s
fourth largest box office territory, but revenues and admissions for much of
CY21 are still at rock bottom levels. South Korea has controlled the virus better
than many countries, but it has failed to prevent new clusters emerging–
nationwide there have been over 400 new cases per day as per data on June 3,
2021–and anti-virus vaccination levels are currently low.
Discounts for vaccination: As per latest reports, multiplex operators have
started giving discounts for moviegoers who have been vaccinated. Lee Chang-
moo, president of the Korea Theater Association, was quoted by local media as
saying, “we’ve decided to launch this campaign in hopes of encouraging people
to get vaccinated and return to normal daily life as soon as possible.”
This has prompted a muted response in occupancy. Occupancy levels have
failed to recover since a peak in October. For much of 2021 weekend, box office
has languished in the USD3-4mn range. Local news sites have reported that,
“the long-standing malaise has caused several distributors to delay theatrical
releases and divert some key titles directly to streaming platforms. And several
cinemas have closed their doors.”
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Major releases have done well: However, despite general tepid footfalls, major
releases still evinced good response. For example, ‘’The movie Demon Slayer –
Kimetsu No Yaiba The Movie: Mugen Train’’ pulled in large crowds. Collections
also perked up to over USD6mn for the last two weekends of May, propelled by
the arrival of F9 at the top of the chart. F9 has sped off to USD15.1mn
cumulative collections since its release on May 19. That makes it the third
highest grossing film this year in Korea. At this pace, it will soon overtake
“Demon Slayer The Movie: Mugen Train” with a running total of USD17.9mn
and Soul, currently on USD17.1mn. Chains like CGV ran promotions by offering
popcorn in cement bags for discount during May 2021.
Outlook: The market seems to be facing operational difficulties and slow
recovery in occupancy. Pipeline seems to be impacted by delays by movie
producers and shift to OTTs. But once again what’s heartening is the strong
support major releases have garnered.
CGV promotion - Popcorn in cement bags
Source: CGV cinemas
Top grossing movie in Japan and South Korea - Demon Slayer
Source: msn entertainment News
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Conclusion on Eastern markets: Overall, when we look at eastern markets, we find
that the most markets have started permitting theatres to operate, albeit with some
restrictions. Despite some producers delaying movie releases, major movies have
garnered strong support. Similarly, we believe strong content will play a major role
in pulling crowds. There does not seem to be any hit on revenue of major releases
and no discounts in terms of ticket prices for them. This is a strong positive.
F9 performs in East & West markets
Source: msn Entertainment News
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Scenario in Western global markets
European cinema
UK theaters reopen with restrictions and strict rules: Cinemas across England,
Scotland and Wales were allowed to reopen from May 17. Prime Minister Boris
Johnson confirmed the third stage of government’s roadmap to easing
restrictions, which allows for theatres to reopen with rules that need to be
followed by visitors. Ireland has opened cinemas on June 7 with 50 people max
capacity per screen.
Some of the rules in place at various multiplex chains include:
1) Social distancing will be in place, with physically distanced seating. This
means there will be unoccupied seats between parties.
2) Film start times will be staggered to prevent crowds and queues gathering
in foyers, and only pre-packaged food and drinks will be on sale. Cash will
not be accepted.
3) Customers are encouraged to book tickets online where possible to reduce
contact with staff.
4) Face coverings are required inside cinema halls, but once customers are in
their seats they can remove these to enjoy food and drink alone.
5) High touch points like door handles and arm rests will be frequently
sanitised and perspex screens will be erected in areas where social
distancing is difficult to maintain.
UK reopening saw strong box office performance: In the UK, Sony’s animated
comedy Peter Rabbit 2 drove UK cinemas’ box office takings in their reopening
weekend to the highest since the pandemic took hold in 2020, giving a boost to
cinema chains, which had been burning through cash during months of
lockdowns. Overall box office collections at the weekend of reopening came in
at more than GBP7mn, with the speed and size of the return beyond anything
most companies were expecting, UK Cinema Association CEO Phil Clapp told
Reuters.
French cinemas see quick recovery: After six months of shutdown, French
cinemas opened with a bang. Inspite of an audience cap of 35% and a 9 P.M.
curfew, as many as 305,000 tickets were sold on reopening day, making it the
best reopening performance in Europe. Eric Marti at Comscore points out that
“the number of admissions sold yesterday is on par with about the same day in
May 2019, when John Wick: Chapter 4 and Aladdin had just come out. But back
then, there was no cap on audience capacity, and no curfew.”
Some of the highest grossing films on the first day of reopening in France were
animated film Demon Slayer: Mugen Train and animation/live action blend Tom
and Jerry, followed by Quentin Dupieux’s Mandibles and Romain Quirot’s The
Last Journey of Paul W. R.
Local language films do well in second unlock: Last time they reopened after a
long lockdown in June 2020, European cinemas had Christopher Nolan’s Tenet
to lure people back in. In May 2021, however, there wasn’t a single US
blockbuster. Instead, a wide-ranging roster of about 20 films drew huge lines
outside cinemas before the curfew kicked in.
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Outlook: Industry experts are tracking performance of Disney’s Cruella and
Paramount thriller Ä Quiet Place to see if the strong demand for blockbusters
sustains. So far, responses have been positive, with A Quiet Place taking No. 1
position and Cruella No.2 in box office performance.
US cinema
Major US multiplex chains waited for the onset of summer to reopen in 2021. Today
multiplexes like AMC Entertainment, Cinemark and Regal Cinemas have also
allowed visitors who have got both doses of vaccine to remove masks within cinema
halls, after changes in CDC guidelines. The regulatory aspects and restrictions,
however, are more subject to state laws. We have listed an overview of them below.
US regulations in various states (as of 12 May 2021)
Regulations No of States
20-29% Occupancy Cap 8
50-69% Occupancy Cap 18
70-90% Occupancy Cap 1
Strict Social distancing norms 15
Most Restrictions lifted 9
Source: ScreenDaily
US multiplexes pinned hopes on the list of big summer titles that were lined up,
including Fast & Furious, Black Widow, Cruella, 101 Dalmatians and A Quiet Place
part 2. So far, A Quiet Place and Fast and Furious have drawn in considerable
crowds, which is a strong positive.
A number of releases hit OTT platforms only after a theatre launch like CODA.
Disney is slated to release Jungle Cruise simultaneously with a theatre release.
Major films garner good response: Industry analysts have noted that big budget
movies have drawn in attractive amount of crowds and looking ahead movies
like Jungle Cruise, The Green Knight and comedy film Hitman’s wife’s bodyguard
have garnered good response from their trailers and expected to bring in good
crowds.
In the recent months the three big chains have reported strong comeback in
footfalls and revenues with no discounts on tickets for any film category.
Outlook: Overall, we see that the industry is doing well with quick recovery and
good pipeline of movies. We have noticed that the industry did not face any
issues of movie releases being bundled too close together, which allowed big
films to earn maximum box office revenues. The strong comeback in demand is
a positive.
Conclusion on western market: Overall, we see the trend of demand for major films
playing out here as well. We also note that strict safety norms at these theatres have
helped get faster regulatory clearance to reopen, albeit with caps. It is heartening to
see that many chains reported full occupancy (within the caps) at some of their
locations for major films. This shows there is strong pent-up demand.
Also animated movies like Demon Slayer and Disney movies like Cruella went
through theatre screens despite the producers having the ability to do an OTT launch
( Disney has its own OTT which has significant presence worldwide). This is a strong
positive.
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Outlook for Indian market: Huge pent-up demand
India’s multiplex industry has been hit hard by the pandemic over the past one year.
There was very few content coming out as producers decided to delay releases and
wait for normalcy. This kept footfalls tepid even after multiplexes were allowed to
open with restrictions during October 2020.
Single screens take hit: EY has estimated anywhere between 1,000 to 1,500 single
screens to have shut operations due to the pandemic. During conference calls
with PVR and INOX, managements mentioned that many single screens have cut
capacity to rent out the real estate to other shops.
We believe the second wave will further impact single screens. We believe going
ahead impact of second wave, along with the general trend of rising disposable
incomes and multiplexes improving penetration, single screens will further
reduce in India. PVR management, during its latest conference call, mentioned
that multiplexes are improving presence in all addressable markets.
Industry during first unlock: The industry saw easing of restrictions from October
2020, when theatres were allowed to open with caps on occupancy. However,
there was very limited content around to pull crowds.
Tenet, which released in the first week of December, was the first big-budget
Hollywood feature to go for a theatrical release since theatres reopened and had
an impressive first weekend collection and grossed INR105mn in two weeks.
Q3FY21 saw the theatrical release of Bollywood movies such as Suraj Pe Mangal
Bhari and Indoo Ki Jawani, which received modest footfalls overall. Thus,
Q3FY21, for most part, ended up being a negligible quarter.
Regional films to rescue: South Indian cinema grossed more than Hindi cinema
in 2020 as it managed to fit in three hit films which grossed over INR1bn in
domestic theatrical revenues.
During the start of the year 2021 (in Q4FY21), though there was limited major
content from Bollywood and Hollywood, the industry saw some blockbuster
releases in regional market like Master in Tamil kick starting the industry
recovery and instilling confidence among producers. It was heartening to see
almost immediate return of footfalls and strong support from South markets
from December 2020 to March 2021. In fact, these movies garnered almost full
occupancy (within cap) in certain locations and gave high overall occupancy to
multiplexes. It instilled confidence that good content can still pull large crowds
similar to a normal year.
Following these positive sentiments, from Bollywood Roohi was a major film
which was released during Q4FY21, before second wave news hit the market.
Both Roohi and the major regional releases garnered strong support and
multiplexes saw no discount in ticket prices. This strong recovery bodes well for
the industry.
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Regional films garner more share
1 4%
11% 14%
0.8
39%
45% 46%
0.6
0.4
57%
0.2 44% 41%
0
CY18 CY19 CY20
Regional Bollywood Hollywood
Source: EY M&E sector re-boost report, March 2021
Major southern films in CY20 and Q4FY21 (INR mn)
Film Domestic gross box office Language
Master 2500 Tamil
Ala Vaikuntapuram 2110 Telugu
Sarileru Neekaveru 1,740 Telugu
Darbar 1,380 Tamil
Pattas 390 Tamil
Bheeshma 350 Telugu
Ancham Pathira 335 Malayalam
Ayyappanum Koshiyum 240 Malayalam
Shylock 230 Malayalam
Naan Sirithaal 180 Tamil
Varane Avasyammunde 180 Malayalam
Source: Edelweiss Research
Second wave hits screens: Once news of the second wave hit, there were more
delays from producers and restrictions from various states. This sent the industry
into a lull again. As we stepped into Q1FY22, theatres were completely shut for
the most part.
Simultaneous and OTT releases: Once news of second covid wave hit some
producers took to OTT platforms to release their movies in India and abroad. Big
budget film like Radhe and some much awaited movies from Hollywood like The
Old Guard, Mulan, Enola Holmes, etc., were released on OTT. But we believe that
there is no structural threat to the multiplex industry.
Theaters still remain favourite of producers: PVR management, during its latest
conference call, mentioned that this is an experiment and there is no major shift
towards OTT releases among producers. This is evident from what we have seen
in other markets, where once theatres opened up even with restrictions,
producers preferred to go to them first. Particularly, we have seen that
producers of big budget movies would prefer to wait and release in theatres than
OTT.
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For example, after initial talks about release on Amazon, the producers of Bond
movie No Time to Die have said they will wait for theatre release. Similarly, as
per PVR management, many big budget Bollywood movies like Sooryavanshi, ‘83,
Atrangi Re, Prithviraj, Jersey, Bachchan Pandey etc., are waiting for better time
for theatre release. Producers of major southern film RRR have also announced
that OTT release on Zee5 will be after theatre release.
We believe OTT platforms have definitely received a push due to the pandemic.
But, halls and OTT will co-exist. Producers will continue to release first in theatres
as it gives them better upside and then on OTT immediately after a few weeks to
earn from both media. Disney, for example, has decided to release its major film
Cruella first on screens for a few weeks despite owning its own OTT platform
Disney+.
Phased reopening: We expect with the strong vaccination drive, population in
tier 1 and 2 cities will see a higher proportion of vaccinated individuals compared
to the nation’s average. This should prompt phased reopening in these cities,
which also form major market for multiplexes. As per MINT and a few other film
trade specialists, phased resumption of cinema is most likely. "We should be
looking at a three-month period for all cinemas to open up nationally," Mr.
Gautam Dutta, CEO, PVR, said.
Present situation across states: The Maharashtra government has allowed
multiplexes to reopen in low risk areas. It has allowed normal reopening in “Level
1” areas and reopening with 50% cap in “Level 2”areas. Delhi and Chandigarh
have also allowed reopening of malls, bars and gyms with restrictions, though
currently theaters remain shut for this phase of reopening, it is still a positive
sign.
The industry is closely monitoring the pandemic situation and state regulations
as the next good window for releases would be during the upcoming festivals in
Q3FY22. Industry leaders have said that they will also talk to regulators regarding
opening up initially with strict rules as we have seen in Maharashtra and other
markets like UK.
Box office growth and projections
Source: CRISIL media industry report
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Upcoming Bollywood pipeline
Movie Cast
BUNTY AUR BABLI 2 Rani Mukerji, Saif Ali Khan
SOORYAVANSHI Akshay Kumar, Katrina Kaif, Gulshan Grover
SATYAMEVA JAYATE 2 John Abraham, Divya Khosla Kumar
BELL BOTTOM Akshay Kumar, Mrunal Thakur
83 Ranveer Singh, Deepika Padukone
SHAMSHERA Ranbir Kapoor, Sanjay Dutt, Vaani Kapoor
CHANDIGARH KARE AASHIQUI Ayushmann Khurrana, Vaani Kapoor
GANGUBAI KATHIAWADI Alia Bhatt, Ajay Devgan, Shantanu Maheshwar
ATRANGI RE Akshay Kumar, Sara Ali Khan, Dhanush
ATTACK John Abraham, Rakul Preet Singh
JAYESHBHAI JORDAAR Ranveer Singh, Shalini Pandey
ANEK Ayushmann Khurrana
DHAAKAD Kangana Ranaut, Arjun Rampal
MAIDAAN Ajay Devgan, Keerthy Suresh
PRITHVIRAJ (DIWALI) Akshay Kumar, Manushi Chhilar
JERSEY Shahid Kapoor, Mrunal Thakur
BHOOL BHULAIYAA 2 Kartik Aryan, Kiara Advani
BRAHMASTRA Ranbir Kapoor, Alia Bhatt
Source: PVR and INOX investor presentation
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Major upcoming Bollywood pipeline
Source: PVR investor presentation
Our expectations going ahead: We believe the industry has strong pent-up
demand and a lot of good content which producers are sitting on. Bollywood
films are likely to release quicker as a number of international markets are
opening up and Bollywood movies derive significant revenue from these
markets. We remain confident regarding the industry’s ability to bounce back
quickly as and when regulations become lax. As seen in other markets, major
films will still be able to pull in crowds as before and collections should recover
fast.
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PVR management outlook
Source: PVR
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Aditya Narain 30d6543d198e765a5f4f487d18fe852817f
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Date: 2021.06.18 14:15:14 +05'30'
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